After
more than a decade of war and nation-building, members of
the International Security Assistance Force (ISAF)—the multitasking army of
armies that has tried to transform Afghanistan into a healthy, or at least
harmless, nation-state—are heading for the exits. Although ISAF will leave
behind a better country than what was there in 2001, Afghanistan remains a
battered land.[1]However, that land may hold a silver lining.

Of
course, the fact that Afghanistan is rich in minerals is not necessarily new
information. The Soviets, for instance, explored and identified mineral
deposits in Afghanistan during their decade-long occupation in the late 1970s
and 1980s (Medlin). What is new is the volume and precision of mineral-related
information about Afghanistan.

Afghanistan
is the first country to be fully mapped using what’s known as “broad-scale
hyperspectral data”—highly precise and highly sensitive technologies deployed
by aircraft that, in effect, allowed US military and geological experts to peer
beneath Afghanistan’s skin and paint a picture of Afghanistan’s vast mineral
wealth (USGS, 2012). “These maps clearly show the enormous size and variety of
Afghanistan’s mineral wealth and position the country to become a world leader
in the minerals sector,” according to Jim Bullion, who heads a Pentagon
taskforce focused on postwar development and stability (USGS, 2012).

There’s
another set of factors at work today that were not present during the Soviet
period: These minerals are in high demand in the global marketplace; the
dependability of the rare-earth element (REE) supply chain has been called into
question; and Afghanistan’s mineral wealth may be able to help knit the country
back together after decades of war.

Supply Chain Worries

Let’s look first at the demand for
REEs and Afghanistan’s other latent mineral stores. The importance of REEs to
the global economy cannot be overstated. REEs are essential to the manufacture
of a range of modern technologies, including cell phones, televisions, hybrid
engines, computer components, high-efficiency light bulbs, lasers, industrial
magnets, batteries, fiber optics, and superconductors. Although lithium is
technically not a rare earth, as a key component in today’s rechargeable
batteries, it serves some of the same purposes as rare earths. Indeed, the American Physical Society
calls lithium, REEs, and other elements “that have the capacity to
transform the way we capture, transmit, store, or conserve” energy, “energy
critical elements” (APS).

In
short, the supply of REEs and like minerals is critical to the
technology-dependent global economy of today, which makes a dependable supply
chain critical. Regrettably, the main supplier of REEs has proven itself
unreliable.

China
produces 97 percent of the world’s REEs and has begun to manipulate the global
REE market by dramatically slowing and, in some cases, even halting export of
these materials (GAO 18, 20). In fact, after a maritime dispute with Japan,
China stopped supplying REEs to Japanese customers, reduced overall global
exports by 72 percent in the second half of 2010, and then cut export quotas
for the first half of 2011 by 35 percent (Wall
Street Journal, 2010). Beijing claims its actions were a function of plans
to cut pollution (Bloomberg, 2012).

Although
Beijing has resumed delivery of REEs, China’s actions have prompted the United
States, Japan, and Europe to explore alternative sources. The good news is that
market forces are already at work diversifying the REE supply chain. Australia
has new REE mines coming online this year (Taylor). Mines in Brazil, Canada, Vietnam,
and the US could start producing REEs by 2015 (Canadian Chamber of Commerce,
2012; Humphries, 2012: 13).

Strategic Stockpiles

Afghanistan
can be part of the long-term solution to this REE-supply problem. Just as
important, Afghanistan’s mineral wealth could help the people of Afghanistan.
To underscore the impact that perhaps $1 trillion in REE development could have
in Afghanistan, consider that its entire GDP is just $33.5 billion today (CIA,
2013).

Even
so, if rebuilding the rare-earth mining and manufacturing base in the United
States, Canada, and Australia—among the richest, most developed, most stable
countries on earth—is going to take time, then building a rare-earth mining
system from scratch in one of the most broken countries on earth is not going
to happen overnight. There’s a reason Afghanistan is not even mentioned in the
Institute’s latest Survey of Mining Companies, which evaluated 96 jurisdictions worldwide.

To
be sure, the conditions are anything but ideal in Afghanistan: Corruption
remains a challenge; stability and security exist only in pockets; and the
ingredients that encourage foreign investment—the rule of law, human capital,
infrastructure—are in short supply. For instance, political dysfunction is
plaguing efforts to build rail lines considered crucial to transporting
Afghanistan’s mineral wealth (Nissenbaum, 2012).

Yet
what Afghanistan lacks in infrastructure—both institutional and public—it makes
up for in rare-earth riches, which explains why foreign governments are willing
to look past the many impediments to development. Of course, those impediments
are significant, and removing them will require time and a commitment within
Afghanistan to embrace economic freedom.

Aiming
to build up what the US Department of Energy calls “sizable stockpiles” of
REEs—and no doubt exploit its supply advantages—Beijing is eager to develop
Afghanistan’s mineral riches (Department of Energy 66). China has won
exploration rights for copper, coal, oil, and lithium deposits across
Afghanistan (Associated Press, 2013). There are reports that Beijing won the
rights to develop the Aynak copper mine south of Kabul by bribing Afghan mining
officials $30 million (Risen, 2010).

Make
no mistake: China can play an important and constructive role in Afghanistan.
Development in Afghanistan can be assisted by foreign investment, and Beijing
has the resources to make crucial investments in Afghanistan’s future. In
addition, beyond the financial side of the ledger, Beijing has promised to
train 300 Afghan police officers, thus contributing to efforts to stabilize
Afghanistan (Associated Press, 2013). Before they end their mission, ISAF
nations should use their considerable leverage with the Afghan government not
to secure sweetheart deals for Western investors and developers, but to ensure
a level playing field for any firm willing to take a risk on developing
Afghanistan’s mineral wealth.

To
encourage this process, some observers have proposed the creation of an Afghan
Mineral Fund—“an independent agency run like a public-private investment fund,”
in which private investors and Afghan government agencies would contribute
resources and “collect
and direct extractive revenues” in a transparent manner, thus helping to
promote shared development as well as economic growth (Tucker and Khanna,
2010). Similar efforts have been employed in Norway, Kazakhstan, and Mongolia
(Tucker and Khanna, 2010).

Another
policy solution might be found in the Millennium Challenge Account program
(MCA).

Launched
by the United States in 2003, MCA offers support to developing countries as
they build institutional and physical infrastructure—everything from irrigation
projects to roads to property-rights initiatives (Millennium Challenge
Corporation). The MCA program is by no means perfect. Indeed, there are limits
to what foreign aid programs can achieve. But one important distinctive of the
MCA program is that, at least as it was conceived, MCA applicants are supposed
to prove their commitment to good governance, economic freedom, and investing
in their citizens to earn an MCA grant (Millennium Challenge Corporation). Thus,
an MCA-type aid program could have the effect of fighting corruption and
promoting economic freedom in Afghanistan because proving a commitment to
economic freedom and good governance are prerequisites for MCA grantees. This
is important given that Afghanistan languishes at the bottom of a global index
of corruption (Transparency International).

Several
economic, governance, and security indicators are pointing in a positive
direction:

·
ISAF has built an Afghan security force
of some 340,000 troops, key to a stable environment after ISAF’s withdrawal in
2014 (O’Hanlon and Livingston, 2013: 6). The US is planning to maintain a force
of several thousand trainers and advisors in Afghanistan after 2014, as a
backstop against chaos and as a check against interference from neighbouring
countries (Bumiller and Schmitt, 2013). Equally important, Washington and Kabul
signed a long-term strategic partnership agreement in 2012, committing the US
to Afghanistan’s stability well into the 2020s (White House).

·
Insurgent attacks are down and trending
lower (O’Hanlon and Livingston, 2013: 10).

·
US/ISAF casualties are at their lowest
level since late 2001 (O’Hanlon and Livingston, 2013: 11).

·
GDP is growing at a vibrant pace—an
average of 9.6 percent per year since 2008 (O’Hanlon and Livingston, 2013: 23).

·
There are now more than 8 million
students attending school in Afghanistan, including some 3 million girls—up
from a total of 2 million in 2002, when just a handful of girls were in school
(O’Hanlon and Livingston, 2013: 26).

Of
course, these represent only some of the pillars of a stable and healthy Afghanistan.
The foundations of economic freedom—personal choice, voluntary exchange, freedom to enter and compete in markets,
property rights (Gwartney, et. al 1)—have yet to fully take root in
Afghanistan.

Curse or Blessing?

Some
observers warn that if Afghanistan’s mining sector does take off, the country
could succumb to the so-called “resource curse”—the notion that
natural-resource wealth can actually hinder economic growth by diverting
investment away from other sectors and encouraging high levels of government
spending. Supposed examples include Nigeria after oil discoveries and the
Netherlands after natural gas discoveries.

There
are two ways to answer the resource-curse naysayers: First, on a very practical
level, the world should be so lucky if the resource curse becomes the main
concern for Afghanistan—a country that has endured and caused so much
heartache.

Second,
the resource curse may be a bit overblown. A 2009 Institute report, for
instance, found that early studies into the resource curse “overlooked the role
of economic institutions and the possible interaction between natural resources
and the quality of institutions. Nations with economic institutions of higher
quality are more capable of managing their resource revenue and turning it into
positive economic growth” (Karabegovic, 2009: 1-3). This underscores the
importance of the aforementioned policy prescriptions.

Moreover,
Stephen Haber and Victor Menaldo, political scientists specializing in the research
of mineral booms, note that “roughly twice as many countries have been blessed
by resource booms as cursed by them” (2010). “Until its late 19th century oil
and mineral boom, Mexico was not a whole lot different from Afghanistan,” they
note, citing poor infrastructure, a largely illiterate population, and a weak
central government hampered by warlordism. Oil and mineral discoveries did not
cure all of Mexico’s ills, of course. To this day, Mexico remains one of the
more corrupt countries in the world, ranking 105th out of 174 nations measured
on the corruption index (Transparency International, 2012). However,
natural-resource wealth did help stabilize Mexico’s political system and
legitimize the state.

Similarly,
there are too many challenges—Afghans are still learning about economic
freedom; political corruption runs high in Kabul; Afghanistan’s geographic
remoteness will always be an issue; Afghanistan’s neighbours to the east and
west are mischievous, to put it politely—to think of REEs and other minerals as
a panacea. But if something akin to the Mexico model can take root in
Afghanistan, then the world can help solve Afghanistan’s instability problem
and Afghanistan can help solve the world’s rare-earth supply problem.